What’s happening in Hong Kong for SMEs

Australian small businesses could definitely do worse than going into Hong Kong. Here’s a special report about the opportunities available for SMEs in this bustling business centre.

Hong Kong has long been known as a world business centre. When the city was still under British sovereignty, it was a haven for expats seeking a foothold in Asia. Things haven’t changed since it was officially handed back to China in 1997. The famous ‘one country, two systems’ chant is still ringing down the streets and alleyways of this bustling city.

But what does that actually mean? Essentially, Hong Kong is a standalone region, quite separate from its Chinese rulers, while still maintaining very close ties with the mainland. It’s a place where business is not only welcomed, it’s given the royal treatment. Massive state-of-the-art centres tailoring to specific industries are springing up, with the local government offering full support. So while China may still offer some difficulties for international businesses looking for trade, Hong Kong is opening its doors to anyone with an innovative mind and an eye for business. And best of all, it’s right next door to one of the world’s largest manufacturing nations.

Why Hong Kong?

For a first time visitor, Hong Kong can seem a little overwhelming. It’s packed with people, and while skyscrapers cover the skyline, it’s also surrounded by green mountains. Its nightlife is incredible – you might think that New York is the city that never sleeps, well Hong Kong is the city that not only doesn’t sleep, it parties all night.

There’s no shortage of entertainment for your visit to Hong Kong, especially when the city is doing its best to improve its cultural standing for international visitors. Massive construction is currently underway on the Kowloon side, called the West Kowloon Cultural District. This area has been designated as an arts haven, with theatres, opera centres, a Xiqu Chinese Opera theatre as well as the obligatory (in Hong Kong anyway) shopping centres and apartments.

Hong Kong also has about 40 percent of its land reserved for conservation and recreation. Despite the dense city being the first thing that assaults your senses as you arrive, only 15 minutes out you will find beaches and rolling green mountains covered in trees. It is this sense of contrasts that has attracted more than half a million expats to settle in Hong Kong.

Business in Hong Kong

With everything else that’s going on, it’s not surprising that Hong Kong is seen as being a very attractive prospect for businesses. But it’s not just the lifestyle that is attractive: since Hong Kong formally became a Special Administrative Region of the People’s Republic of China in 1997, Hong Kong has enjoyed tariff-free trade with China. That means if you are an exporter based in Hong Kong, your products can enter the mainland tariff-free, in line with the particular Rules of Origin under the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China.

Hong Kong is certainly opening its doors to business. Cyberport, a sprawling complex comprising over 100 businesses and over 5,000 workers, was built specifically as a hub for IT businesses. Not only a collection of offices, Cyberport also provides high speed internet, high tech equipment, and state of the art facilities for hire to both businesses that operate from within the complex and others coming from outside.

Ron Davenport, General Manager of Australian company Access Testing HK Limited, says that his company chose Cyberport to set up because of the opportunity it offered to learn. “One of the biggest challenges you face in any new market – especially in Hong Kong – is how do you explain what your business does and convince people to take a chance with someone new to the market. Cyberport gives you a chance to learn from what other companies have done – especially small businesses.”

Similarly, the shining new community that is Hong Kong Science and Technology Park in the New Territories of Hong Kong, provides the best technology and facilities to businesses with a science bent, including those looking into biotechnology and green technology. Over 350 mainland, local and overseas companies are resident in the park, generating more than 7,600 jobs.

Both business centres are incredibly supportive of new business, with both offering rent-free periods and incubation units, and these are showing tremendous success. Cyberport’s graduates from Phase 1 of its Digital Entertainment Incubation-cum-training Centre, exceeded targets, and 79 percent are still in operation. “Basically they get free space for two years,” says Mark Clift, COO of Cyberport. “They get help with marketing, they get help with training and they get mentoring.”

Unsurprisingly, there are many international companies making their way into Hong Kong. Some are even choosing to list on the stock exchange there, including leading international brands (particularly popular in Hong Kong) such as Prada. Though the stock exchange is more a ceremonial location now, with the trading room looking quite empty as brokers do most of their work in offices and online, the stock exchange is a place where the ghosts of market crashes and successes still linger. With 140 non -Chinese and non-Hong Kong companies currently listed, Hong Kong, especially now as European and US markets struggle, is surely looking a more attractive place for companies to list their initial public offerings.

World SME Expo

The annual World SME Expo and the Inno Design Tech (IDT) Expos were held in November last year at the massive Hong Kong Convention and Exhibition Centre (HKCEC). Together they attracted 720 exhibitors from around the world. The SME Expo focused on offering services for Hong Kong-based SMEs to help them get established, with everyone from computer, IT, banking and other financial services offering assistance. Forums and lectures were also held throughout the week, with topics covering everything from advice on getting business in India, to how Chilean businesses are doing in Hong Kong.

Aussie Matti Brooks, who works for LHK Media in Hong Kong, was present at the Expo with the Australian Chamber of Commerce who put the company in touch with others in the region. He was enjoying the experience of networking at the Expo and said that the Chamber of Commerce was incredibly helpful. “If any Australians were coming over I would recommend they get in touch with Australian Chamber of Commerce. They helped put us in touch with the right people and right companies.”

Ian Mathison of the Hong Kong-Australia Business Association also had a stand at the expo and was hoping to attract more members. “There’s a need for people to be talking face to face and we can help with that. We have wineries that are members for example. People might be doing a lot of online marketing but when it comes time for wineries to introduce their new vintages, they have to pour wine in a glass somewhere. We offer support for companies and their strategy to be an importer or exporter of products in their region.”

With thousands of people walking around, you’d be lucky to spot an Australian flag. But we did, attached to the booth for Filippo. The company, who are chartered accountants based in Melbourne, have recently opened an office in Hong Kong and they did it all on their own. “I set up my operations here in Hong Kong without any help from anybody. It actually is quite straightforward,” said managing director Giovanni Filippo. The company was present at the expo to offer its services to Hong Kong and China-based companies looking to come into Australia. “One of our biggest potential export markets is offering financial services,” he says

Filippo’s wife and the company’s business and marketing manager explains further how Australian financial services can be a valued export in the region. “We help people make sense of the Australian tax system. It’s a complicated regime, it’s complicated for Australians, so try being from another country and doing it.”

IDT Expo

But the SME Expo wasn’t the only event taking place in the spectacular HKCEC. The IDT Expo was dominated by the clean lines and practicality of German design, as the 2011 Expo’s partner country featured 150 companies from Germany. An exhibition of creations from young and emerging designers invited by the German Design Council focussed on the expertise of clean design from all perspectives. With the collection presented upside down, it showed how German designers consider their objects, inside and out.

Hong Kong company Evergreen Horizon took an innovative approach to its stand, as staff showed us inside their theatre-type set-up, serving drinks to visitors as they watched a movie of previous work projected onto the roof.

As a melange of designers, businesspeople and visitors swarmed throughout the halls of the convention centre for the three days of the expo, the opportunity to meet many people from all walks of life arose. A woman dressed in traditional dress explained as she manned her stand that SMEs in China have found it very difficult of late to operate because of the struggles with the international market. Her company, Aunty Chai, who produce a sweet rice snack food, has benefited from the support of the Chinese Government however, who are apparently very supportive of small businesses in helping them grow.

Business of IP Asia Forum

As an almost perfect addition to the expos running in the trade halls next door, the HKCEC was also the chosen location for the first Business of IP Asia Forum. The forum played host to speakers from every sector of the IP industry, all coming with the message that IP is safe in Hong Kong. Margaret Fong, deputy executive director of the Hong Kong Trade Council, said that this forum reflected the changing nature of trade throughout the world. “Traditional East to West movement is giving way to more two-way trade,” she said. Andrew Liao, a Practising Senior Counsel and chairman of the Steering Committee on Review of Intellectual Property Issues in the Innovation and Technology Sector, added to the sentiment by saying: “The future for Hong Kong is as a global IP marketplace.”

Protection of IP was often reiterated throughout the visit to Hong Kong, and is safely enforced according to all accounts. Simon Galpin, Director General of InvestHK, was keen to point out the region still maintaining an English common law legal system. “The rule of law is very vibrant in Hong Kong. We often joke that this is one of the few places in Asia where an individual can take the Government to court and win because of an independent judiciary.”

Soaring high above the busy city, you’re surrounded by skyscrapers bearing the names of major international companies: Epson, Samsung, Phillips, Panasonic; not to mention every shopping centre featuring Ferragamo, Gucci and Rolex stores, so it’s impossible not to be reminded how Hong Kong is successfully operating as a massive business centre for companies from all over the world. And perhaps this is a good thing. With Europe in turmoil and the US making a slow recovery, Hong Kong locals remain optimistic and very proud about their place in the world and maintain that they will stay ahead of the game. As Galpin says, “You’ve got to start somewhere,” and it’s not hard to see that, for a business looking to hit the international market, Hong Kong is a pretty good place to start.

–Rhiannon Sawyer was a guest of the Hong Kong Trade Development Council at the World SME and IDT Expos and the Business of IP Asia Forum.

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